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Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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Latest Push by CMS for Increased Price Transparency Highlights Opportunities and Risks for Clinical Laboratories, Pathology Groups

As federal regulatory agencies continue to push transparency, hospitals, medical labs, anatomic pathology groups, and other healthcare providers must develop strategies for remaining competitive and maintaining patient volume

More price transparency continues to be a goal of Medicare officials. Some clinical laboratory managers and pathologists may be unaware of a proposed rule issued by the federal Centers for Medicare and Medicaid Services (CMS) in April that would require hospitals to post prices online as early as this January 1, 2019.

This action is a definitive demonstration of how the federal healthcare program continues to scrutinize how healthcare organizations communicate with patients and post their prices. This pressure on healthcare systems and individual providers extends to the clinical laboratories and anatomic pathology groups that support them. Without a plan to address these changes, medical laboratory test volume and practice revenues can be severely impacted.

Recent coverage from RevCycleIntelligence indicates that this trend is only just getting started.

“When you go to receive a healthcare service, there are always going to be situations where you can’t know what the costs will be, especially around emergency situations and some acute situations,” Centers for Medicare and Medicaid (CMS) Administrator Seema Verma told RevCycleIntelligence. “But for a lot of us, we’re going in for planned procedures. You should be able to know what it’s going to cost you.”

In April 2018, CMS posted a proposed rule that requires hospitals to post standard service rates online and update their pricing lists at least annually starting January 1, 2019. While many healthcare organizations currently report pricing to state boards and other online directories, this rule, if enacted, could make it easier for consumers to source reliable pricing information before obtaining care.

“We are concerned that challenges continue to exist for patients due to insufficient price transparency. Such challenges include patients being surprised by out-of-network bills for physicians—such as anesthesiologists and radiologists who provide services at in-network hospitals—and patients being surprised by facility fees and physician fees for emergency room visits. We also are concerned that chargemaster data are not helpful to patients for determining what they are likely to pay for a particular service or hospital stay,” the CMS proposed rule states.

In the proposed rule that references out-of-network bills, pathologists should have been included as a hospital-based physician service—such as anesthesiologists and radiologists—that submits bills to patients for care provided in the hospital. Pathology practice administrators may want to review the specific language of the proposed rule to understand how hospitals served by the pathology group will be required to post prices.

Seema Verma

“If you’re buying a car or pretty much anything else, you’re able to do some research,” Seema Verma (above), Administrator, Centers for Medicare and Medicaid Services told RevCycleIntelligence. “You’re able to know what the quality is. You’re able to make comparisons. Why shouldn’t we be able to do that in healthcare? Every healthcare consumer wants that.” (Photo copyright: Centers for Medicare and Medicaid Services.)

Transparency Concerns Lead to Additional Questions from CMS

Alongside the proposed rule, CMS also is issuing a request for information (RFI) to give healthcare experts an opportunity to:

  1. Demonstrate the impact of current proposals; and,
  2. Make recommendations to further align the proposal with both the needs of healthcare organizations and service providers as well as the cost-reduction goals of CMS.

Key questions, according to RevCycleIntelligence, include:

  • How should “standard charges” be defined (e.g., average or median rates for chargemaster items; average or median rates for groups of services commonly billed together as determined by the hospital; or average discount off the chargemaster amount across all payers)?
  • What types of information would help patients understand hospital prices and patient financial responsibility? How should hospitals use this information to inform patients and decision-making?
  • Should healthcare providers be required to tell patients about their out-of-pocket costs for a service prior to care delivery? Should providers even play a role in informing patients of out-of-pocket costs?
  • Should CMS require providers to give patients information on what Medicare pays for a service?
  • How should CMS enforce healthcare price transparency requirements? Should hospitals have to attest to meeting requirements?

Implications for Healthcare Services and Diagnostics Providers

RevCycleIntelligence reports that between CMS rules and bills introduced by Senators, an increase in healthcare transparency pricing is likely. These requirements will continue to apply pressure to clinical laboratories, anatomic pathology groups, and other diagnostics providers.

Much like the importance of communicating value to the new wave of payer and physician partnerships emerging around the country, transparency will offer an opportunity to communicate value to consumers.

However—particularly for high-margin services and assays—laboratories must create strategies to address pricing transparency and communicate the value of their services if they hope to maintain volumes and financial integrity at existing levels.

A study conducted by Johns Hopkins University researchers and published in The American Surgeon also highlights benefits that transparency might hold outside of simple regulatory compliance.

Analyzing data from six ambulatory care centers from 2016, they found that five out of six reported increases in both patient volume and revenue after adopting price transparency. Half of the centers also reported a reduction in administrative burden—a concern that medical laboratories must also address as streamlining operations and optimizing efficiency becomes a core part of successful lab operation in the face of healthcare reform.

Clinical laboratories and anatomic pathology groups should develop a strategy for addressing new transparency requirements. That strategy should include ways to effectively communicate their value to both healthcare providers and consumers. Should the CMS proposed rule progress to a final rule, failure to address pricing transparency may result in enforcement and compliance concerns—a critical issue for laboratories already facing tighter markets and increased regulatory and payer scrutiny.

—Jon Stone


Related Information:

“Just the Beginning” of Healthcare Price Transparency, Verma Says

CMS Aims to Catalyze Advancements in Consumer Price Transparency

Verma: CMS Will “Use Every Lever” for Promoting Interoperability, Data Access

CMS to Require Healthcare Price Transparency Online for Hospitals

Publish Your Prices, Boost Your Bottom Line

Healthcare Price Transparency in U.S. Not Improved in Recent Years

The Impact of Price Transparency for Surgical Services

Patients’ Views on Price Shopping and Price Transparency